Germany Mulls Pausing Supply Chain Law to Boost Competitiveness

The German government is considering pausing its supply chain due diligence law to reduce the bureaucratic burden on companies until a European directive takes effect in 2026. This act, effective since January 2023, mandates companies with over 1,000 employees to monitor suppliers' human rights and environmental standards.

The German government is considering pausing the country's supply chain due diligence law for two years to ease the bureaucratic burden on companies until a European directive takes effect, Economy Minister Robert Habeck said on Friday. Germany's supply chain act, which took effect in January 2023, requires companies with more than 1,000 staff to implement due diligence procedures to monitor suppliers' human rights and environmental protection standards.

German companies have been struggling to meet the cost and bureaucratic burden of the law, saying it was harming their global competitiveness. A similar European Corporate Sustainability Due Diligence Directive (CSDDD) was approved by the EU parliament in April and is due to be rolled out in 2026.

Germany will have to redraft its own supply chain law once the European law comes into effect. "We can pause it. That would be the best thing. I think that is absolutely feasible," Habeck said at an event for family-run businesses, adding that suspending the national law could be a liberating move for companies.

A final decision on the issue is expected in two to three weeks, he added. Habeck's proposal received mixed reactions from the government coalition partners.

The parliamentary group of the Social Democrats party rejected the suggestion, adding his statement was "very surprising". "Does a top Green politician seriously want to sacrifice human rights in order to curry favour with family businesses?," SPD labour policy lawmaker Martin Rosemann told Reuters.

FDP lawmaker Carl-Julius Cronenberg welcomed Habeck's suggestion, saying suspending the law would create breathing space for small and medium-sized businesses needed in economically difficult times.

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